China South Locomotive & Rolling

Stock Corp Stock code: 1766.HK

Last close: HK$2.76

Entry: HK$2.65

Target: HK$2.98

Stop loss: HK$2.49

By Castor Pang

China South Locomotive & Rolling Stock Corp is a leading rail equipment producer and solution provider. Its first half net profit increased 1.49 times to 809 million yuan. Its gross profit also increased by 4.1 percentage points to 18.7 percent.

The mainland's investment in and its expansion of its railway network, moves which have subsequently led to an increase in demand for high-end locomotive equipment, will benefit the company that now boasts a market share of approximately 80 percent.

The company will announce its business results tomorrow and market observers expect the company to demonstrate a strong performance.

The income from its initial public offering has helped the company's asset liquidity and debt-paying capacity. The long-term outlook is positive. It is advised to enter at HK$2.65 with a short-term target of HK$2.98. It is wise to stop loss at HK$2.49.

The author is a senior independent commentator.

China Mobile

Stock code: 0941.HK

Last close: HK$63.95

Target: HK$79.90

Support: HK$60

By Lai Wai-shing

Despite its campaign into rural market, new low-end users as well as new telecom fees reform, China Mobile saw net profits reach 82.59 billion yuan, up 37.9 percent, year-on-year.

The growth rate in the first half, first quarter and last year were 44.7 percent, 37.2 percent and 31.9 percent.

Its EBITDA (earnings before income, tax, depreciation and amortization) dropped to 52.8 percent from 53.1 percent.

The company's users reached 436 million, up 21.53 million during the third quarter.

Its ARPU (average revenue per user) lowered to 83 yuan from 84 yuan.

Its value-added service business saw remarkable development. Message user increased by 23.1 percent, year-on-year. The income from the value-added service business surge to 52.9 billion yuan, up 26.4 percent, year-on-year, and accounting for 27 percent of the total turnover.

It is predicted that the company's rural development campaign will significantly contribute to its growth.

The author is a senior independent commentator.

Pacific Century Premium Developments

Stock code: 0432.HK

Last close: HK$1.80

By Marco Mak

The failure of the HK$2.85-a-share privatization attempt by Pacific Century Premium Developments (PCPD)'s parent PCCW (0008.HK) in April means that a revised minority buyout plan would unlikely be launched in the ensuing 12 months. We believe if there is a revised privatization offer for PCPD, the price will be no less than the exercise price of the convertible bond.

A likely scenario for the restructuring is distribution of PCPD's cash to its shareholders.

The failure of the previous privatization of PCPD clearly indicates that the institutional shareholders of PCPD will be firmly asking for a fair price for their investment. Other than PCCW's controlling shareholding, PCPD shares are tightly held by four investment funds, leaving a free float of only 6 percent in the market.

PCPD's earnings for FY08 will be underpinned by the booking of the development profit from Bel-Air No8, the last phase of the Cyberport development.

For FY09, the development profit from One Pacific Heights and the sale of certain remaining Bel-Air houses will be major contributors.

An affiliated company(ies) of Taifook Research Limited has, presently or within the last 12 months, an investment banking relationship with the listed corporation herein covered.

The author is an analyst with Taifook Securities.

(HK Edition 10/23/2008 page3)